Bausch Health Acquires Durect for $63M, Betting on Liver Disease Candidate

Bausch Health has announced a strategic acquisition of Durect Corporation for $63 million upfront, securing a phase 3-ready liver disease candidate with potential blockbuster status. The deal, which could reach a total value exceeding $400 million, marks a significant development in the pharmaceutical industry's pursuit of treatments for alcohol-associated hepatitis.

Acquisition Details and Financial Implications

Bausch Health's offer represents a premium of over 200% on Durect's closing stock price, breathing new life into the smaller biotech firm which had been struggling with dwindling cash reserves. The agreement includes substantial milestone payments, with $100 million due if annual sales surpass $500 million and an additional $250 million if sales exceed $1 billion.

This acquisition aligns with Bausch Health's strategy to bolster its pipeline ahead of anticipated patent expirations. The company is particularly focused on offsetting the expected loss of exclusivity for Xifaxan in 2028, with larsucosterol now joining a rifaximin formulation in late-stage development.

Larsucosterol: A Controversial Asset with Potential

The centerpiece of the acquisition is larsucosterol, a DNMT modulator that has shown mixed results in clinical trials. Despite failing to meet its primary endpoint in a phase 2b trial for alcohol-associated hepatitis in late 2023, Durect has maintained optimism based on secondary endpoint data and subgroup analyses.

Durect's previous estimates suggest larsucosterol could achieve peak sales exceeding $1 billion in the U.S. market alone. However, investor skepticism following the phase 2b results had put pressure on the company's ability to fund further development independently.

The Road Ahead: Phase 3 Trial and Market Landscape

With Bausch Health now at the helm, larsucosterol is poised to enter a pivotal two-year phase 3 trial. The timeline suggests top-line data could be available by 2027, potentially positioning larsucosterol as the first approved therapy for alcohol-associated hepatitis.

The landscape for liver disease treatments remains competitive, with several companies advancing their own candidates. Aldeyra Therapeutics, Intercept Pharmaceuticals (an Alfasigma company), and Yale University are currently conducting phase 2 trials, while Nterica Bio is preparing to initiate phase 1 studies. Notably, Surrozen recently withdrew from this therapeutic area.

Bausch Health's acquisition of Durect and its lead candidate larsucosterol represents a significant bet on the future of liver disease treatment. As the phase 3 trial progresses, the pharmaceutical industry will be watching closely to see if this gamble pays off, potentially reshaping the market for alcohol-associated hepatitis therapies.